from the the-broken-system dept

We've been covering for a while entertainer Kevin Smith's business model experiments, which rely heavily on his wonderful ability to connect with fans. We've also been fascinated with his more recent decisions to buck "the old way" of doing things and to focus on marketing his latest film, Red State, in a way that he thought made more sense. So far, that's meant a very cool (and quite profitable) plan for Smith to tour with Red State and to combine his usual (wonderful) Q&A sessions with showings of the film. Another part of the plan is getting the film out there in as convenient a way as possible, meaning a video on demand release before the wider theatrical release.

One of the key points of this plan was that he wasn't going to fall into the trap of wasting money on advertising. So far, everything that he's done has been built off of word of mouth -- in large part from his Twitter feed and his growing network of podcasts (I used to listen to nearly all of them, but can't keep up any more). And it's worked out great. Crowds continue to flock to see him, and the movie is getting plenty of buzz among the folks its targeted at. However, he's finally made an exception to the "no advertising" rule, though he's somewhat annoyed that he had to do this. If you've heard him speak about Red State, you've heard him talk about a few of the top notch performances that came out of the film, and Smith and some others think that perhaps some of those performances are "Oscar-worthy." But... the Motion Picture Academy is not known for changing with the times or being willing to adapt to the way films are watched these days. So it "requires" certain things to happen to have a movie "qualify" for the Academy Awards, and that apparently includes a week's worth of screenings at a "real" theater... and newspaper advertising. Why? Who the hell knows. Just don't question the Academy.

Per the AMPAS rules that govern the qualification for the Oscars, paid ads needed to run in conjunction with a seven day, official theatrical engagement. This was a bitter pill to swallow, as we’ve sold lots of Red State tickets all year long without running a single paid ad. But a rule’s a rule, so after the AMPAS folks signed off on the New Beverly for the home of our Los Angeles run, we spent $9,316 on newspaper ads.

It still makes me queasy – solely because it’s money not well-spent. We’d sold out all of our weekend screenings before the ad ever ran in either of the three papers we bought space in: the LA Weekly (six inch ad), the LA Times (same), and the west coast edition of the NY Times (1/2 page ad).

Comparing the take on various live showings that he's been doing, Smith notes that two shows he did last week in Texas basically "covered" the cost of the ads, which seems pretty silly. You're supposed to be advertising to make more money, not making money to pay for the ads you don't want. But such is the legacy structure of the movie industry these days.

Separately, we greatly appreciate the fact that Smith is willing to be so open about the financial results, which helps give more people the details needed to understand how these industries work. It's so rare that people doing these kinds of experiments are willing to reveal any numbers, so it's refreshing to see him being so open. The only thing that would be even better is if he could also open up about some of the costs, so we can get a better idea of the net results, rather than just the gross. Obviously, the theater takes a cut of some of this stuff, and that would be useful for others contemplating following in his footsteps. But, still it's great to see this kind of openness:

we ran the flick for a week at Quentin Tarantino’s New Beverly Cinema in Los Angeles (big thanks to Julia!), where we did two screenings a night, which I followed with 30 minute Q&A’s. Tickets were $20 for the Friday to Wednesday screenings and were followed by post-show Q&A’s with Fatty McNoFly, scourge of the skies.

Since few movie sites ever wanna include us in their box office wrap-up pieces (nor mention that we had the highest per screen average for the last two weeks), here’s the financials for how Red State performed that week…

On Thursday, I didn’t Q&A after the screenings at all, as per AMPAS rules (regarding leaving filmmaker-free screenings open for Academy members so they can watch the flick without influence). Thursday’s ticket price was only $7 for the movie only ($7 is the normal New Beverly admission price, although usually that’s for a non-first-run double-feature). Even that did solid numbers…

Of the 2,675 seats available from Friday to Wednesday, we sold 2,580. From Friday to Wednesday, over the course of twelve screenings, merely 95 seats ever sat empty. Had our start time been 7:30 each night, we likely would’ve sold those seats as well (it’s a bitch getting anybody out in L.A., let alone at 6:30 at night; folks are still getting home from work).

Ah, but isn't the movie industry dying? That's what the MPAA keeps telling us. And yet, if you connect with fans and give them a real reason to buy, it seems they don't mind buying... Shocking, I know...

from the and-that's-how-it's-done dept

We've been following, with great interest, entertainer Kevin Smith's business model improvisations for quite some time now, including some of his podcasting and speaking efforts (beyond just being a filmmaker). We've also been interested in his attempt to go around the "traditional" movie marketing and distribution schemes with his latest flick, Red State. While many attacked or panned his plans to tour directly with the movie and then self-release it in theaters, that plan has made the movie profitable, even before the theatrical release. And, in the land of Hollywood accounting, where most movies -- even the most "successful" are never "profitable," that's quite a feat.

The latest in this plan is that Smith has done a deal with Lionsgate for Video-on-Demand and DVD/Blu-ray distribution. From the beginning, he'd made it clear that he wanted to partner on those things, so this isn't a huge surprise. Where it does get interesting is that the VOD plan will hit the market on Labor Day this September. That's noteworthy, because the theatrical release doesn't happen until October, over a month after the VOD release. And... as we've noted, theater owners are so clueless about what it is they really offer the public, that they're absolutely spooked by any kind of non-theatrical release that doesn't happen many months after the theatrical release, insisting that they just can't compete.

So I would imagine that some theater owners who don't bother to actually understand what's going on will freak out about this as well (and potentially refuse to show Red State). However, as per usual, and very much in keeping with Smith's standard way of operating, he's put together a plan that gives people even more value for going to catch the flick in the theaters. Sure, you'll be able to watch the movie at home via VOD, but he's making sure that the theater experience includes a ton of scarce value as well:

Like let’s say Red State is showing at your local multiplex. But then right after the movie ends, a live, interactive Q&A with the filmmaker starts, beamed into the theater via satellite. Even if you’re not there in the room, you’re Tweeting questions from your theater and getting responses from the guy on the big screen. And then, after three hours of movie and interactive Q&A? Boom: LIVE PODCAST! That’s four hours of once-in-a-lifetime entertainment for less than $20: a movie, a show, then another show.

Oh, look at that. Not only is he connecting with fans, but he's giving them a real, scarce reason to buy. He's adding additional value to the theatrical performance so that people have more reasons to go out to that, even if they can access the VOD version at home. And, he seems pretty aware of how clueless the big theater chains are about these things, as he walks them through the basics here, step by step:

Now, before some old dick like ol’ cranky Mr. “GET OFF HOLLYWOOD’S LAWN!” tries to make a beef with me and theatrical exhibitors in their ongoing war with the studios over the shrinking theatrical window and premium VOD’s role in decreasing box office revenue, let me remind REGAL and AMC, CINEPLEX or any other theater chain that I’m not the enemy. Please don’t lump me in with people trying to take money out of your pockets, Exhibitors. This is a (not-so) new way to make money and fill your empty buildings when there isn’t a Transformer to save you. On a fucking Monday night, no less.

Want fresh eyes and asses in your theaters? Try a one-night-only screening of a movie, a Q&A, and a live podcast: all for under $20 a ticket. The positive feedback you’ll receive from your paying customers alone will be worth it, but the concessions loot you’ll rake in that night will make you richer than the pharaohs (my people like to eat snacks). And if I can make this work? That means anybody can make this work. And that means more people coming to your theaters. Jump into digital bed with us: there’s not enough money going around anymore to quibble over restrictions that shouldn’t apply to a specialized film in the first place. I can sell these events out and make you money without spending money to do so – all while giving a normally slow night a massive shot in the arm. If not, no worries: there are lots of Mom & Pop single-screens out there who’ll welcome us warmly as well.

Of course, this is no different than what many of us have been saying for years, but Smith can back it up with paying customers, so maybe (just maybe?) one of those theater owners will take notice.

from the not-bad dept

We've written a few times about filmmaker Kevin Smith and why he's a content creator (not just filmmaker) you should be paying attention to if (like most of us around these parts) you're interested in new business models for content creators. That's because he's really done an amazing job (for years) combining the two key elements that we believe are at the heart of any new successful business model: connecting with fans and giving them a reason to buy. The key thing is that he doesn't go through the motions on either part (as many do), but really goes to great lengths, both in connecting and in giving really powerful reasons to buy.

Lots of folks panned him for his plan to take his latest movie, Red State, on a nationwide tour this spring, followed in the fall with a standard theatrical release -- but via his own distribution efforts, rather than teaming up with a US distributor (they're still working with foreign distributors due to lack of familiarity or simple feet on the ground in those markets). As we noted at the time, the plan didn't seem all that crazy when you looked at it. He's done very successful Q&A tours where he just performs by himself. This time around he'd be doing the same thing... but with a movie. And, part of the reason why all of this works is because he's made a real, rather than superficial, effort to connect with his fans.

It seems like the plan is working so far. At the very end of a (somewhat touching, if slightly fawning) blog post about Quentin Tarantino, Smith mentions in passing some details about the economics of Red State, concerning the tour and other deals in place, which show that the film is pretty close to being out of the red (no pun intended, really) and into the black:

Over the course of the 15 shows of the Red State USA Tour, we made almost one million dollars from ticket and merchandise sales. A few times, we had the highest per screen average in the country. We started out with a record-making show at Radio City Music Hall and went on to average 1100 people per screening. Had we booked ourselves into smaller houses, we could’ve SOLD OUT every show; but being in the larger houses cost us nothing extra.

And apparently, we managed to pull 1100 a night solely from our podcasts: when asked nightly if they heard about the show from a show at SModcast.com, an overwhelming 85/90% of the audience indicated yes (Jon swears it was 100% in Seattle). That bodes well for SIR.

You take what we made on the tour, you add that to the $1.5mil we’ve pulled in from foreign sales thus far (with a few big territories yet to sell). Add to that $3mil we’re on the verge of closing for all North American distribution rights excluding theatrical (which means VOD/HomeVideo/PayTV/Streaming).

The flick cost $5mil to make, but $4mil after the California tax incentive. One of the only things Jon and I promised the Red State investors in exchange for letting us handle American theatrical distribution ourselves was that their $4mil would be covered as soon as possible – something very few other production entities can promise or even offer. Invest a million dollars in almost any production, and you rarely if ever get your money back within five years, let alone the one year it’s looking like it’s gonna take for our guys to make their money back.

Add up all those figures above and you’ll notice our gains are higher than our spending. And without any dopey marketing figures to have to recoup, once we close the aforementioned deals (which Jonn Sloss & LawCo are working to close as we speak), simple math dictates Red State is in the black – long before any wide release. That’s music to the ears of any investor who only put up their money in September.

Now, he claims that "this business bullshit should only be important to the investors," but I disagree. I think it's important and helpful for those who are blazing new trails to share whatever they're comfortable sharing so that others can learn from it. And, by learn from it, I don't mean to mimic it. I'm not talking about cargo cult copying. But learn from the general concepts, and see what can be applied to other situations.

And, given a world with Hollywood accounting, where most movies are designed on purpose to "lose" money on paper, it's quite interesting (and nice) to see a different path being taken.

Now, there is one element that I'm not clear on and perhaps some of you with experience in the movie industry can help out. I tried to reach out to Kevin himself on Twitter, but the man's busy (and sick) and (from the sound of it) getting even less sleep than I do. Here's the part that I'm confused about: I'm familiar with startup investing, where investors (generally VCs) plow a bunch of money into a company in exchange for equity. In those cases, they don't ever expect to get paid back out of revenue, but through the eventual sale of their equity (hopefully for many, many, many, many times what they paid for it). However, in this case, Smith is talking about getting the investment back to his investors quickly (out of the revenue). So, if that's the case... do they still have a financial stake in the later success of the movie? Is it structured as a combination of loan and equity, where they have to pay the investors back first, but then there's also upside on the latter part? Because if they're just getting their principle back, that's nothing special. No one invests in something just to get their money back. They invest for upside. Does it work like a record label deal? Where the "investment" is really an "advance," and the first chunk of revenue all goes to paying back that advance, and then after you "recoup" (as is about to happen here), there's a royalty split? I'm guessing it's something like that, but it would be nice to know the details.

But, even without that information, one thing that is nice to see is an experiment in trying something different with how a film is marketed, distributed and monetized is already working. That's exciting.